02 Feb 26' Trader perspective - Crypto in a local spot for upside
What happened today? Trader thoughts on todays market information
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The stock market continues its upward trajectory, with the SP500 and Nasdaq closing up roughly 50bps higher. However, this overall rise masks significant weakness in major tech stocks; Nvidia, Microsoft, and Oracle are all down more than 100bps, with NVDA dropping -2.89%, MSFT down -1.61%, and ORCL down -2.75%. In contrast, AAPL is leading the charge, up 4.06%. Despite these gains, stock markets remain in bubble territory. Ed Dowd warns of three major risks threatening the US economy: a housing market distorted by post-COVID money printing and immigration, the stock market bubble itself, and a contagious economic crisis in China. Dowd argues that due to affordability issues, the only possible resolution is a housing price collapse of over 20/30%.
Dowd characterizes the current environment by stating, “We are in credit destruction cycle”. He predicts a credit problem will strike sometime this year, eventually turning stock prices into bargains. Although the Administration is attempting to delay and fix this issue, these interventions are only exacerbating the problem; cash is trash until the moment it becomes king.
The situation is particularly dire in China, where GDP growth has fallen from a pre-COVID rate of 5-6% to effectively 0% when priced in dollars. While China attempts to depreciate the yuan to boost exports, tariffs are limiting the effectiveness of this strategy. These internal liquidity crises and slowdowns in economic activity will likely trigger defaults and negative feedback loops. As Japan’s largest trading partner, China’s economic distress will spread directly to Japan and South Korea, eventually impacting the US and stock markets globally.
Gold sits in a reserve territory for central banks, allowing them to create fractional money. For every dollar of gold secured in vaults, central banks have the optionality to unlock market liquidity sustained by the gold standard. Currently, countries depreciating their currencies by 10% annually provide significant upside for gold, which will likely be priced above $10k by 2030 due to continued buying pressure from central banks. However, the short-term outlook for precious metals is tricky. Since last Friday, gold is down -15%, dropping from $5,500 to $4,700. This rapid decline forced the CME to increase margin requirements, meaning the chart will take time to fix before accumulating again or reaching new highs.
Silver has faced an even steeper decline, losing more than -35% since the highs. As mentioned in previous reports, silver was sitting at uncomfortable prices, and the massive unwind occurred on Friday. A V-shaped recovery is unlikely; as CME increases margins, traders will close profitable positions to stack 2026 gains, and professionals will stop out of their trades, waiting for better pricing points to re-enter. This volatility makes silver appear riskier than Bitcoin. Investors witnessing this crash will likely prefer accumulating Bitcoin for its favorable risk-reward ratio, lower downside, and higher potential upside.
Bitcoin is positioned as the safer substitute, currently trading below $80k following three waves of liquidations. This setup offers a massive trade opportunity for those following prices closely. While retail investors—the smaller cohorts—are net sellers who will likely FOMO back in at higher prices later, whales with >10BTC are aggressively buying the dip. Over 100 new addresses have entered the >1k BTC club, holding nearly $100m in BTC. Historically, such whale accumulation determines the market bottom, suggesting we will see a new high for Bitcoin by year-end.
Beyond price action, the crypto industry is maturing, with technology being absorbed by major companies. The market no longer values random tokens without clear fundamentals; the focus is now on real revenue projects, where exchanges remain the best crypto business. Hyperliquid exemplifies this, trading at $33 with high catalysts ranging from HIP-3 reaching a new ATH of $1b OI and $4.8b in volume to the HIP-4 announcement. Unlike the CME, which introduced authority risk by changing margins overnight on gold and silver, Hyperliquid offers a structural advantage in perpetual products with massive liquidity and user experience. With a market cap of $8b, TTM revenue of $800m, and a PS of 10, HYPE compares favorably to HOOD, which has an $80b market cap and a PS of 16. Considering 100% of HYPE revenue funds buybacks, there is a high probability HYPE eventually trades above HOOD market cap.
The broader crypto sector is set for further upside. Although recent meetings between banks and crypto firms lacked a clear outlook, Trump will likely mandate a deal, reinforcing his stance: “I am a big crypto person”.
Finally the merger of SpaceX and xAI is finally here. This consolidation suggests SpaceX will likely become the first trillion-dollar IPO.